E-commerce pits food brands and grocers against each other

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Dive Brief:

As food brands and grocers struggle to survive in the e-commerce age, their needs and interests are sharply diverging, a CB Insights report on food tech trends for 2018 revealed.

Brands like McCormick's, Nestle and Tyson are increasingly taking control of their own supply chains and turning to e-commerce sites to reach consumers directly, rather than going through a grocer. They are also buying up delivery startups for the same purpose.

New competition is the wild card. Because the food industry is in flux, food brand startups are popping up on e-commerce sites or with their own websites and fast delivery programs, giving the landed brands — like Campbell and Kraft Heinz — a run for their money.

Dive Insight:

E-commerce is reshaping how consumers think about grocery shopping, but as grocers scramble to develop their own home grocery delivery methods, brands are checking out of the grocery sphere to handle their supply chains and sales and operations planning (S&OP). These changes reflect a growing decentralization in grocery.

As CB Insights noted, some brands are opting to use Amazon as their main distribution channel: PepsiCo, McCormick, Mondelez and Tyson are just a few examples. That could be a good solution for food brands for now, "but Amazon is increasingly competing with its own private label products," the report stated.

The upheaval is sparking new entries to the food industry. New brands that sell online, on Amazon or in some retail stores are appearing, and according to the report, they're more adaptable to consumer tastes and thus wildly successful.

Traditional brick-and-mortar grocers no longer have the control over distribution like they once did. Instead, food brands are turning to e-commerce sites or developing their own resilient supply chains.

According to the report, that's leading to renewed focus on the cold chain and supply chain traceability — which is why blockchain is starting to make a splash in the food industry.

To stay relevant, grocers will need to sharply differentiate themselves from the likes of Amazon-Whole Foods partnerships and new food brands. Some may double down on relationships with landed food brands, but ultimately grocers will need to develop a business strategy that keeps pace with changing consumer demands and tastes.

Food brands are already starting to figure that out, and they will break with grocers who they believe aren't properly gauging and meeting consumer expectations.

Whole Foods earned an "A" and Amazon received an "F" in the second scorecard from environmental group Friends of the Earth, which measures how well major retailers protect pollinators and humans from the chemicals.